Hon Peter Dunne
Minister of Revenue

Wednesday, 16 December 2009
Media Statement

Dunne: Tax crucial to capital markets reform

Revenue Minister Peter Dunne today welcomed the Capital Markets Development Taskforce’s recommendations to improve the functioning of New Zealand’s capital markets.

“As part of its report, the Taskforce has recommended a number of changes to the tax rules so they do not distort investment choices.

“It is particularly encouraging to see that a significant number of those recommendations show a high degree of support for the Government’s current tax policies and for its work towards reforming the tax system,”Mr Dunne said.

“In the area of company taxation, for example, four of the recommendations endorse much of the Government’s current work relating to the future shape and direction for our imputation system.

“In particular, the Taskforce has recommended that the company tax system with imputation be retained and that mutual recognition of imputation credits with Australia be pursued. Following an invitation from Treasurer Wayne Swan, New Zealand made a submission on mutual recognition to the Henry Review in Australia and the proposal is being considered in this context.

“The Taskforce also recommends that “streaming” of imputation credits not be allowed. A Government discussion document released in August last year sought submissions on the streaming of imputation credits. Officials expect to consider the imputation issue next year.

“The Taskforce has also endorsed changes suggested in an officials’ paper released in September which would exempt certain interest payments from non-resident withholding tax and from the approved issuer levy. Changes are being suggested because the current rules may be hindering the development of a domestic bond market.

“Another recommendation supports clarifying the tax treatment of profit distribution plans, and the income of non-resident partners in New Zealand limited partnerships. Officials have already begun work on both issues.

“Other recommendations made by the Taskforce, such as possible ways to reduce tax biases between different investments, are being considered in depth by the Victoria University of Wellington Tax Working Group as part of its work on a long-term vision for reforming the tax system,” Mr Dunne said.

“The remaining recommendations are to allow a tax deduction for the cost of raising equity, and to bring the tax treatment of annuities into line with the treatment of similar investments.

ENDS

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